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Tuesday, June 5, 2012

Moral Compass and Purchasing from China

What does your moral compass tell you about purchasing goods and products from China? Just where does your opinion reside on this controversy?

Does you organization have a policy concerning domestic versus foreign procurement? Where do you go for major raw material purchases?

How do you decide when the numbers tell you one thing and your moral compass says something different?

I had just this situation a few years back. Plywood out of the Northwest kept costing more and more. Another supplier, and a US supplier at that, offered me a program supplying product from China. Our initial investigation showed the product to be inferior to US//Canadian product even at huge cost differential.

Further investigation and strong effort from our US supplier resulted in the development of a suitable source in China with a much higher level of quality control—these guys were good. Then came the formaldehyde scare  associated with all plywood. The situation caused some significant delay, but eventually we were satisfied that the formaldehyde emissions were under control and everything seemed to be on the right track. After all, we had written assurance that our US supplier would make good on any shortcomings should the China resource not comply and at the established rates.

Our main concern was that the Chinese were trying to buy the business and the subsequent price would jump to levels comparable to the US//Canadian pricing—this was a major concern.

After all, how could these guys buy logs from the Pacific Northwest, ship them to China—stripping the veneers in route, apply veneers to plywood core in a China manufacturing facility, ship finished containerized product back to west coast, transship containers to Texas, warehouse containers and still have a better price than the US//Canadian suppliers? On top of this, the quality of the end product was higher than that supplied by domestic suppliers; a quandary that defies logic.

Not every product coming from foreign suppliers is substandard. To compete in areas where we (Americans) have lost our footing, we have to get better at controlling our cost and producing a product that meets international competition.

So, you make the call. How would you decide? Take the deal or pass it up?

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